Correlation Between Carnegie Clean and Bluescope Steel

Can any of the company-specific risk be diversified away by investing in both Carnegie Clean and Bluescope Steel at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Carnegie Clean and Bluescope Steel into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Carnegie Clean Energy and Bluescope Steel, you can compare the effects of market volatilities on Carnegie Clean and Bluescope Steel and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Carnegie Clean with a short position of Bluescope Steel. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carnegie Clean and Bluescope Steel.

Diversification Opportunities for Carnegie Clean and Bluescope Steel

0.23

Correlation Coefficient

Carnegie Clean  Bluescope Steel

Modest diversification

The 3 months correlation between Carnegie and Bluescope is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Carnegie Clean Energy and Bluescope Steel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bluescope Steel and Carnegie Clean is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Carnegie Clean Energy are associated (or correlated) with Bluescope Steel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bluescope Steel has no effect on the direction of Carnegie Clean i.e., Carnegie Clean and Bluescope Steel go up and down completely randomly.

Pair Corralation between Carnegie Clean and Bluescope Steel

Assuming the 90 days trading horizon Carnegie Clean is expected to generate 4.85 times less return on investment than Bluescope Steel. In addition to that, Carnegie Clean is 1.51 times more volatile than Bluescope Steel. It trades about 0.01 of its total potential returns per unit of risk. Bluescope Steel is currently generating about 0.11 per unit of volatility. If you would invest  1,957  in Bluescope Steel on September 12, 2024 and sell it today you would earn a total of  259.00  from holding Bluescope Steel or generate 13.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Carnegie Clean Energy  vs.  Bluescope Steel

Carnegie Clean Energy

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Carnegie Clean Energy are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Carnegie Clean is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Bluescope Steel

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bluescope Steel are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Bluescope Steel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Carnegie Clean and Bluescope Steel

The main advantage of trading using opposite Carnegie Clean and Bluescope Steel positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carnegie Clean position performs unexpectedly, Bluescope Steel can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Bluescope Steel will offset losses from the drop in Bluescope Steel's long position.

The idea behind Carnegie Clean Energy and Bluescope Steel pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.